Cheap Labour is a Relative Term

There has been some controversy lately in the UK after supermarket Sainsburys launched a designer bag to carry your shopping home in, which being manufactured from cotton and rope would hopefully reduce the vast numbers of non degradable plastic bags thrown away each year. However, apparently these aims are not noble enough, and it has been seized upon as an opportunity for campaign groups to criticise Sainsburys for various reason. One aspect of this is complaints about the wages paid to workers in Chinese factories.

This is not a new cause of concern in some areas, particularly with trade deficits between developed and developing countries rising to all time highs. Manufacturers in the West are facing greater and greater pressure on their jobs due to the fact production costs are much lower in countries like China. It is not unusual to see incredibly low wages being quoted and raised as a cause for concern, the implication being that such low wages are unethical, and that companies should be much more reluctant to move production to developing countries. In the case of the Sainsburys bag mentioned above, there is a quote that "workers in the garment industry in China typically are paid 20p to 30p an hour" [1].

On the face of it, to someone in a developed country, this seems quite shocking, but we should investigate what this really means in terms of cost of living, and how this compares to wages for other workers in China, and in other countries. To make this comparison, I have decided to look at the salaries of teachers in China and the UK as a reference point, to try and decide what this sort of wage really amounts to in relative terms. I have chose teachers salaries here for no scientific reason, expect that in both countries, teachers salaries are managed by the government, and as such should be attuned to provide a decent, but probably not luxurious standard of living. You should treat this as an interesting benchmark, not a very precise comparison.

The first question is, what does 20 or 30p per hour equate to as a salary in Chinese Yuan (CNY). Using this website: Currency Conversion, and assuming an 8 hour working day, we can calculate that 25p (the mean wage estimate) per hour works out at 650 CNY per month. Next we need to know the monthly salary of a Chinese teacher. An approximate answer is 1000 CNY per month [2, 3]. This shows us that a Chinese manufacturing worker earns approximately 65% of the salary of a Chinese middle school teacher. This definitely doesn't sound so exploitative any more. Comparing now with English teacher salaries, which can be estimated at 23,000 GBP per year [4], we find that 65% of that is approximately 15,000 GBP per year, which while not a great salary, is certainly not exploitative or particularly unfair, bearing in mind that this is either unskilled or low skilled labour.

So in light of this, we should take it with a pinch of salt when we hear about Chinese manufacturing being unfairly cheap; in fact, considering cost of living adjustments and the relative position of the Chinese economy, the salary of an average manufacturing worker is actually quite reasonable, and not particularly out of line with what a similar unskilled worker might earn in the UK.